Witnesses said tear gas was fired into the mosque prayer room to flush out protesters, who refused to leave the premises.

Pictures also showed soldiers dragging the supporters of ousted president Mohamed Morsi out of the building as they dismantled a makeshift barricade and stormed the building to clear it.

Image Caption:Soldiers fired back after gunfire appeared to come from the minaret

Egypt's state MENA news agency later announced that prosecutors had placed 250 Muslim Brotherhood supporters under investigation for murder, attempted murder and terrorism.

Foreign Secretary William Hague has spoken to the Egyptian foreign minister, condemning the violence and stressing that attacks on mosques and churches are "unacceptable".

The fresh violence flared after hours of negotiations between the two sides - and news that Egyptian Prime Minister Hazem el Beblawi had proposed disbanding the Muslim Brotherhood and that the idea was being considered by the government.

It also emerged that Mohamed al Zawahri - brother of al Qaeda chief Ayman al Zawahri - had been arrested in Egypt for supporting Mr Morsi.

An Egyptian presidential spokesman said the country was facing "war by the forces of extremism" and vowed to "confront terrorism through security measures".

Hundreds of Muslim Brotherhood supporters had barricaded themselves inside the mosque overnight, which was turned into a makeshift field hospital for the wounded and a morgue for some of those killed in the protests.

Four Irish citizens - children of Hussein Halawa, the Imam of Ireland's biggest mosque in Dublin - on a family holiday to Egypt with their mother, were among those in the building.

Omaima Halawa, 21, who was with her two sisters Somaia, 27, and Fatima, 23, and brother Ibrihim, 17, earlier described the scene as frightening, and said a group of women had been escorted out of the building.

Video:Mosque Protesters Were 'Peaceful'

Tensions remained high as a pro-military crowd - and supporters of the deposed Mr Morsi - assembled in front of the building.

The Muslim Brotherhood's London-based spokeswoman Mona al Qazzaz claimed on Sky News that the security forces were responsible for the minaret gunfire - using it as a cover to storm the mosque and remove protesters.

With the Brotherhood vowing to press on with daily protests, more widespread violence is expected across Egypt.

Speaking to Sky News from Cairo, journalist Jared Malsin, said: "Most people are bracing for another wave of demonstrations, as soon as later today.

"The willingness of the security forces to use deadly force over the last several days, and the willingness of the Muslim Brotherhood to continue mobilising in the face of that deadly force show I think that we are going to see more of the same in the coming days and weeks."

He said he believed the country was "more deeply polarised than ever" and that he had witnessed "citizen-organised, vigilante squads" cropping up in individual neighbourhoods in Cairo.

Video:Deadly Clashes Erupt Across Egypt

"In some neighbourhoods they are pro-military, like the one that I ran into yesterday. These are people who are arming themselves with sticks and knives to keep out Muslim Brotherhood people. That in a sense is a worrying development."

"What Egypt is passing through now is the price, a high price, of getting rid of the Brotherhood's fascist group before it takes over everything and ousts us all," Badr, 28, told Reuters in a telephone interview.

In London, demonstrators held a protest against the violence outside the Egyptian embassy.

An explosion damaged the front of the Egyptian consulate in Benghazi, Libya, but no injuries were reported.

More than 1,000 protesters were arrested by police across the country during a "day of rage" on Friday, of which 558 were held in Cairo.

Video:Morsi Activists Take To The Streets

The arrests came after tens of thousands of Brotherhood supporters clashed with armed vigilantes and security forces in the fiercest street battles to engulf the country since the country's Arab Spring uprising.

Tear gas could be seen during flashpoints in parts of Cairo, with protesters apparently hurling bottles and rocks at security forces.

On what the Brotherhood called the "march of rage" in response to the deaths of 638 people on Wednesday when security forces raided two sit-in protests, officials said at least 173 people, including 10 police officers, were killed.

Ammar Badie, one of the sons of the Muslim Brotherhood's spiritual leader Mohamed Badie, was among those killed, the group's Freedom and Justice Party said on its Facebook page.

The 38-year-old died of a gunshot wound while taking part in protests in Ramses Square.

The whereabouts of his father, who has been charged with inciting violence, are unknown.

It is the worst violence the country has seen since the 2011 uprising and ousting of former Egyptian president Hosni Mubarak, under whose rule the Muslim Brotherhood was outlawed as a political organisation.

His trial on charges of complicity in the deaths of protesters has been adjourned until August 25.